Vehicles Purchased or Placed in Service in 2006
The Energy Policy Act of 2005 replaced the clean-fuel burning deduction with a tax credit. A tax credit is subtracted directly from the total amount of federal tax owed, thus reducing or even eliminating the taxpayer’s tax obligation. The tax credit for hybrid vehicles applies to vehicles purchased or placed in service on or after January 1, 2006.

The credit is only available to the original purchaser of a new, qualifying vehicle. If a qualifying vehicle is leased to a consumer, the leasing company may claim the credit.

Hybrid vehicles have drive trains powered by both an internal combustion engine and a rechargeable battery. Many currently available hybrid vehicles may qualify for the tax credit.

These models have been certified for the credit in the following amounts:

Model Year 2007

Chevrolet Silverado 2WD Hybrid Pickup Truck — $250
Chevrolet Silverado 4WD Hybrid Pickup Truck — $650
Ford Escape Hybrid 2WD — $2,600
Ford Escape Hybrid 4WD — $1,950
GMC Sierra 2WD Hybrid Pickup Truck — $250
GMC Sierra 4WD Hybrid Pickup Truck — $650
Lexus GS 450h — $1,550
Mercury Mariner 4WD Hybrid — $1,950
Saturn Vue Green Line — $650
Toyota Camry Hybrid — $2,600
Model Year 2006

Chevrolet Silverado 2WD Hybrid Pickup Truck — $250
Chevrolet Silverado 4WD Hybrid Pickup Truck — $650
Ford Escape Hybrid (Front) 2WD — $2,600
Ford Escape Hybrid 4WD — $1,950
GMC Sierra 2WD Hybrid Pickup Truck — $250
GMC Sierra 4WD Hybrid Pickup Truck — $650
Honda Accord Hybrid AT w/updated calibration and Navi AT w/updated calibration — $1,300*
Honda Civic Hybrid CVT — $2,100
Honda Insight CVT — $1,450
Lexus RX400h 2WD — $2,200
Lexus RX400h 4WD — $2,200
Mercury Mariner Hybrid 4WD — $1,950
Toyota Highlander 2WD Hybrid — $2,600
Toyota Highlander 4WD Hybrid — $2,600
Toyota Prius — $3,150
*2006 Honda Accord Hybrid AT and Navi AT without updated calibration qualify for a credit of $650.

Model Year 2005

Honda Accord Hybrid AT and Navi AT — $650
Honda Civic Hybrid MT and CVT — $1,700
Honda Insight CVT — $1,450
Toyota Prius — $3,150
Consumers seeking the credit may want to buy early since the full credit is only available for a limited time. Taxpayers may claim the full amount of the allowable credit up to the end of the first calendar quarter after the quarter in which the manufacturer records its sale of the 60,000th hybrid or advance lean burn technology. For the second and third calendar quarters after the quarter in which the 60,000th vehicle is sold, taxpayers may claim 50 percent of the credit. For the fourth and fifth calendar quarters, taxpayers may claim 25 percent of the credit. No credit is allowed after the fifth quarter.

For example, F Company is a manufacturer of hybrid motor vehicles, but not advanced lean burn technology motor vehicles. F Company sells its 60,000th hybrid car on March 31, 2006.

Ms. Smith buys an F Company hybrid car on June 30, 2006, and claims the full credit.
Ms. Maple buys an F Company hybrid car on Dec. 31, 2006, and claims 50 percent of the credit.
Mr. Grey buys an F Company hybrid car on June 30, 2007, and claims 25 percent of the credit.
Mr. Green buys an F Company hybrid car on July 1, 2007, and is unable to claim the credit, because the credit has phased out for F Company vehicles.